Smart investments - The appeal of buying near good schools and universities

Caroline James

Investors are rushing to pay up to six-figure premiums for houses near top ranking Melbourne schools, a trend expected to continue in 2014.

Anyone quick enough to nab a three-bedroom house near a top-ranking public secondary school – McKinnon, Balwyn, Glen Waverley among them – or an apartment close to a top university, will “almost certainly get a roaring investment” offering premium rent, low vacancy rates and strong capital growth prospects, according to senior industry commentator, Catherine Cashmore.

The independent buyer advocate agreed vendors near popular schools are clearly benefiting.

But she criticised the existing school zone system as “ridiculous” because it had created inflated housing prices across Melbourne suburbs.

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“You put an elastic band around anything you create pressure, demand, and this translates to grossly inflated prices, often at least 20 per cent above what you pay for a house the other side of the street,” Ms Cashmore said.

“Enrolments in popular school areas should be based on merit ... I find this zone concept absolutely ridiculous.”

Fierce demand for properties inside the enrolment zones of high-performing public secondary schools definitely underpinned last year’s suburban median house price figures, said Andrew Wilson from Australian Property Monitors.

Balwyn, which also has a top-50 secondary school finished 2013 with a median house price of $1,503,000, a 26.6 per cent increase in 12 months.

McKinnon’s median house price reached seven-figures at $1,075,000 for the same period, a rise of 18.1 per cent on 2012, and Glen Waverley’s median house price was $838,750 last year, representing growth of 21.4 per cent compared to 2012, reported the APM senior economist.

Clayton, home to Monash University, recorded a median house price of $600,000 in the six months to December 2013, up 13 per cent year-on-year.

“We have had strong price rises in the inner east based on a number of factors but one clear factor is proximity to good government secondary colleges and also close to the vicinity of private schools, which we are seeing all the way from Brighton to Ivanhoe,” Dr Wilson said.

“There is no doubt that buying close to a good school or university is a smart idea for investors, or any buyer for that matter, given many local Chinese buyers are very focused on the perceived value of being close to quality education facilities.”

Back in September, McKinnon Secondary College principal Pitsa Binnion said the school had received about 600 applications for year 7 in 2014 but could offer only about 320 places (The Age, Sept 15, 2013).

The school has an enrolment zone but also gets applications from outside.

’’We’ve got huge demand,’’ Ms Binnion said. ’’It’s a successful school and people move into the enrolment boundary to ensure their kids have a place.’’

It is a similar story in Glen Waverley, Mount Waverley and Ringwood, all of which boast high-ranking schools.

The business development manager of Thomson Real Estate, Marcel Dybner, said the agency recorded more demand for houses in McKinnon than in any other suburb in 2013.

The demand had come from buyers “wanting to move in so their kids can get into the school” and often resulted in sale prices 20 per cent higher than expected.

“It outperformed nearby suburbs including Bentleigh and Ormond, even though Bentleigh has a much better shopping strip and Ormond is closer to the city,” Mr Dybner said.

Thomson Real Estate took multiple calls from overseas buyers scouting houses near high schools and apartments near universities during 2013.

“We are continuing to get a lot of interest, especially from China-based buyers’ agents sourcing properties for clients, and there are two specific things they want: brand new CBD apartments near universities and brand new houses in school zones.”

This will be music to the ears of Lechte Corporation co-founder Jennifer Lechte, whose development company is selling the last of the 163 apartments in its Campus project in Clayton North, 500 metres from Monash University.

Ms Lechte has also received multiple queries from offshore buyers, notably Asian investors, in recent months.

“We went to Kuala Lumpur last year to exhibit the project and were swamped with interest, having to shut the door at 30 sales even though they (buyers) were lining up,” she said.